It’s not just the number of accounts… it’s the titles.
Regardless of your stage of financial life, building financial literacy creates a better understanding of your existing assets and may make you a smarter banking customer. Knowing how to properly assign title for your bank accounts now can make a huge difference down the road.
Many of us collect bank accounts. We may have opened new ones to get financial bonuses, to segregate money for vacations, to safeguard money for a minor child, or for other reasons. Some are individually owned, some owned jointly with a spouse or parent, some involve a custodial arrangement, and others grant authority to another individual under certain circumstances. Typically, we’re aiming for secure, easy access to our money and wanting to provide for loved ones.
Learn how account titling options affect your family and beneficiaries.
Bank account titling indicates who currently owns the account’s funds and who, if anyone, will receive the funds at the owner’s death. Having yours properly titled can ensure the people you want to take care of won’t be tangled up in a net of confusing accounts.
The common titling options for bank accounts are:
- Single-owner
- Joint-owner
- Beneficiary
- Transfer-on-death/payable-on-death
- Held-in-trust
Why account titles matter.
Eddy & Schein Group recently started working with a family where the husband died shortly after our engagement. Our firm needed to quickly sort out which of the myriad of bank accounts the wife could access and use for her ongoing expenses. Some issues arose because of how the accounts were titled.
About half of their bank accounts were “single-owner” accounts, held by either the husband or the wife. A handful of their accounts were jointly owned, allowing the surviving spouse to continue to access those funds.
The funds in the accounts owned solely by the husband were not available to the wife, even though we were told that he considered all of their money to be intertwined. The husband’s individually owned accounts will need to be probated, an often lengthy and costly process involving court approval of the distribution of the deceased person’s assets.
Reduce the number of accounts. Simplify access.
Easy and timely access to money by those who need it is typically most important. Having fewer accounts simplifies that task.
With our client, there was a concern about not having sufficient funds to support the wife while the husband’s estate was in probate. We investigated each account for potential beneficiaries. If an account had no beneficiaries, it needed to be handed off to the executor to include in the assets to be probated. All of this could have been avoided if the accounts had been held jointly or in trust, or with the intended beneficiaries listed.
Think ahead. Organize accordingly.
In the wake of a life-changing event, particularly the loss of a loved one, intense emotional realities make sorting accounts and meeting obligations incredibly difficult.
Attorneys recommend you regularly review account beneficiaries and make sure they are clearly listed with contact information. Also, learn about the special naming devices for beneficiaries who are disabled and may need to receive government benefits. Consulting an attorney would prove very helpful.
Making any necessary changes while you’re alive and legally competent is one of the simplest estate planning measures to ensure a seamless transfer of funds to support a surviving spouse or children.
Families often approach Eddy & Schein Group with questions about how best to organize their financial affairs. We can help you review how your assets are titled. To find out more about our services, take a closer look at LifeArc.
These articles have additional information about organizing your personal finances for the future:
Personal Finance Preparedness for Uncertain Times – Part One
Personal Finance Preparedness for Uncertain Times – Part Two